Imagine that every time someone uses your product, they tell two more people about it.
And those two people tell two more people, and so on.
That’s the power of referral marketing.
Let’s learn how!
Referral programs commonly require using a marketing software tool for generating codes or referral links that customers can share. Typically the customer receives incentives for referring new customers.
But do they effectively work? Here’s what Draven McConville, CEO & Founder at Klipboard, has to say about it:
“I've learned to value the obvious strength of referral marketing in B2B SaaS… Referrals always get more customers than other ways, with turn rates that are three to five times higher… They [B2B recommendations] tend to have a 40% higher rate of recall than any other technique, leading to high customer retention rate. This means shorter payback periods and a much higher lifetime value, which are things that every SaaS business wants.” - Draven McConville
There is no definitive evidence which suggests the ‘right’ time to invest in a referral plan. It really depends on factors like your goals, budget, customer base etc.
Nathan Clark, the Co-Founder of Gate2AI, shared his perspective on this question:
“It’s not a one-size-fits-all approach. Start when your customers are genuinely thrilled with your product. Look for those ‘wow’ moments when they’re singing your praises.” - Nathan Clark
He calls it a “powerful endorsement” when your customers are happy and they refer others. He claims that referral marketing is “a relationship game”; therefore, “It's not about a quick transaction. It's about nurturing trust and authenticity.”
Here are some general guidelines that can give you a direction:
You want to target the customers who are loyal, happy, and willing to spread the word about your software.
These are the ones who have been using your product for a long time, who have paid for premium features, or who have given you positive feedback.
“What’s in it for me?” That’s what your customer wants to know. You need to give them something that will make them want to refer to you.
Think about what your customers value most - this could be anything from gift cards, discounts, or free access to more features. Just make sure it won’t break your bank.
This is how you will track who referred whom and how you will reward them. You can use a tool like Kiflo, which helps SaaS companies run different kinds of partner programs. Kiflo also lets you give credits to your customers that they can use to pay for or upgrade their subscription.
You need to let your customers know about the referral program and how they can join it. You can do this through different channels, such as in-app messages, emails, social media posts, etc. You also need to plan when and how often you will reach out to them about the program.
Keep an eye on how your program is performing and what results it's bringing. You can look at metrics like how many referrals you get, how many of them convert into paying customers, and how much revenue they generate. You can also experiment with different incentives and see which ones work better.
Referral marketing can help you grow your business, but it is not all sunshine and rainbows. It has some challenges and limitations too.
First of all, creating a good referral program is not a piece of cake. You have to think about a lot of things, like who are your best customers, what kind of incentives will make them refer, how will you track everything, etc. It can be a lot of work and you might need some help from experts or tools.
Secondly, even if you have a good referral program, you can’t rely on it alone. So, you should also use other marketing channels such as SEO, PPC, email, and social media. However, don’t let that stop you from investing in referral marketing. Here’s what Mano Tsiris, Head of Marketing at OneCliq.io, says:
“I can tell you that referral marketing is a game-changer for B2B SaaS companies! Most of our current users came from our affiliates who referred them to us. I think too many business owners hold back on affiliate marketing because they don't think it will be effective… It has changed the game for us and we're only growing bigger because of it.” - Mano Tsiris
Now that you know the limitations of referral marketing, here are some tips on how to make your referral marketing a success:
Imagine going through a long or complicated process to refer a software to someone.
You’ll most likely get annoyed and just close the tab.
The last thing you want is your customer to do that.
So, make sure to give them clear and simple instructions. The fewer fields the better. Ask only for the essential information to make the process as fast and easy as possible. You can use a step-by-step guide or a short video to show them how it works.
Your emails should tell your customers why they should refer and what they will get in return. Make sure the benefits are clear and the CTA is strong.
For example, you can say something like, “Refer a friend and you both get a 25% discount. It's a win-win!”
This page should explain everything about your program, such as the benefits, the rules, and how to join. Make sure it’s easy to find from your homepage or main menu.
You don’t have to do everything manually. You can use software like ReferralCandy to automate the referral process, making it easier for both you and your customers.
You need to answer any queries or doubts that your customers might have about your program. You can do this on your website or in an email to your customers..
You need to constantly review your program’s performance and customer feedback. Use this information to make improvements and changes.
You can use online tools to streamline your referral process. These tools offer features such as fraud prevention, A/B testing, automated tracking, third-party integrations etc. Some of the most notable referral services include:
You can also go for a manual system. But keep in mind that handling a manual referral program may not give you the best results for the time you put into it.
Here are four examples of successful referral programs: DropBox, Binance, Kiva and ActiveCampaign. They are very different, but they have one thing in common: they know how to motivate their customers to refer others.
Let’s take an example of DropBox.
The program lets you invite your friends and family to join DropBox using your special referral link. When they sign up, you both get extra storage space for free - you can get up to 32 GB of free space by inviting more people.
This way, its customers have a better user experience. And DropBox gets to grow their user base naturally and save money on ads. Isn’t that amazing?
Let’s talk about Binance, the biggest platform for trading cryptocurrencies globally.
Binance's referral program is a prime example of effective referral marketing, offering users up to 40% commission for inviting friends. The program is user-friendly, providing a quick and easy process to generate unique invitation links. Rewards include trading fee rebates and cashback vouchers, with flexibility for users to decide how much commission to share. Overall, Binance's referral program showcases how referral marketing can effectively attract and engage users.
Let’s take a look at Kiva, a non-profit microfinance organization that lets you lend to those in need.
How do they get more people to join their cause? Well, they have a Bonus Program that offers you free credits to lend when you invite your friends. This way, you can make a bigger impact and help more people. Plus, you can feel good about yourself and share it with others.
ActiveCampaign is a marketing automation platform that helps you grow your business. But, how do they grow their own community and loyalty?
Well, they have a referral program that rewards you and your friends with credits when they sign up. You get $10 for every successful referral, and your friend gets $10 after their first payment. This way, you both save money and get access to more features.
A good deal, right?
It’s the art of getting your customers to do the marketing for you.
Referral marketing is not a secret recipe that will make your product go viral overnight.
It is a long-term strategy that requires constant effort and experimentation. If you do it right, referral marketing can be a powerful way to grow your B2B SaaS product.
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